Saturday, October 4, 2014

Peak Housing 2.0—Why This Bubble Correction Will Be A “Doozy”

1) “Peak Housing”: The “Return to Normal”
The take-away from last month’s housing data was that “the market was returning to normal”, which despite the persevering weakness, was viewed as a “great thing”. This overly-simplistic and flawed assumption was made, as the all-cash cohort demand dramatically cooled and distressed supply and sales plunged YoY.
What people are suffering from is a lack of a medium-term memory, as what’s happening today happened in 2007/08; “Peak Housing”. (more)

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Jobs Reports Sends Dollar Soaring / Dan Norcini / October 3, 2014
It is quite entertaining reading the barrage of emails that regularly hit my inbox detailing over and over and over, the certain demise of the US Dollar. More often than not, it is the usual gold bug chatter about China buying up all the world’s gold to make the yuan the new global reserve currency. If not that, it is the regional trading agreements bypassing the Dollar which are going to certainly knock the greenback from its throne.
Such things may or may not happen but the point is we have a huge throng of perma gold bulls who continue hanging on to their gold as they have been told that “any day now it is going to launch higher and one does not want to miss the bull move by not having a position”.  “Once the Dollar goes”, so the chatter states, “gold is going to skyrocket”.
Based on today’s surprisingly strong jobs report, that day is going to be postponed for a while longer.
Here is a look at the chart of the US Dollar.
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You’ll Never Believe How Low the Price of Oil Can Go…

by Greg Guenthner
Daily Reckoning

Yesterday for the first time since April 2013, crude’s spot price dropped below $90. It’s back above that mark this morning — but the damage is done.
Oil’s breakdown could take crude lower. Much lower. In fact, according to a report from one of our experts that’s currently making the rounds at the office, oil might have just punched its ticket for a one-way trip to $60.
“Simply put, America is bursting at the seams with oil,” exclaims our own resource maven Matt Insley. “Shale plays across the country are continuing to increase production. According to the U.S. Energy Information Administration’s (EIA) September Drilling Productivity Report, oil production has risen in each of the three major U.S. shale plays (Permian, Eagle Ford, Bakken) every single month this year.
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Housing Bubble in London? / by
With London England the new place to be for oil-rich Russian oligarchs and Middle Eastern sheiks, the question going around is whether house prices are in a bubble. Despite a brief blip down with the credit crunch in 2007-08, prices are back and higher than ever.
The ever-entertaining Tim Harford chimed in recently with a very sensible opinion that economists have a very difficult time identifying what, exactly, constitutes a “bubble.”
One way to look at whether prices are “fair” (short of the obvious answer that “they must be if someone is voluntarily willing to pay the price”) is to look at the price of the foregone alternative.
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Where is the Bottom for Soybeans, Corn and Wheat?

Where is the bottom? I truly wish I knew. For soybeans, the target that many analysts have is $8.00/bushel. At least for me, if I put out a target, there should be firm justification behind it. If I felt it was valid, I would beg, borrow and use all the money I have to sell it. How can anyone know where an exact bottom, or top might be?

What we do know, 2014 is going to be known as the year of the record breaking production in grains not only in the US, but around the world. If 2012 was known as the year of the drought, then 2014 is the year Mother Nature did all she could do to produce bountiful yields. With the yields that have so far have been harvested for both corn and soybeans, we know ending stocks in 2015 are going to be more than we can handle.

Transportation is going to be a major issue. Barge rates now are almost double what they were a year ago. Ocean going ships, especially the container ships are being bid up day after day. And then the problems with the rail system beginning in Canada late 2013, filtering down to the Dakotas this spring and summer will likely become a major problem in the US for the movement of grain.(more)
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Cheetah Mobile Inc (NYSE: CMCM)

Cheetah Mobile Inc. operates a platform that offer mission critical applications for its users and global content distribution channels for its business partners in the People’s Republic of China. The company’s mission critical applications optimize Internet and mobile system performance and provide real time protection against known and unknown security threats. Its mission critical applications include Clean Master, a junk file cleaning, memory boosting, and privacy protection tool for mobile devices; Battery Doctor, a power optimization tool for mobile devices; Duba Anti-virus, an Internet security application for PC and mobile devices; Cheetah Browser, a safe Web browser for PCs and mobile devices; Photo Grid, an easy-to-use photo collage application that allows users to quickly create professional looking collages of photos through an intuitive interface for mobile devices; and Antutu Benchmark, a mobile hardware benchmarking application, which performs CPU, GPU, RAM, and I/O tests for Android devices.
Take a look at the 1-year chart of Cheetah (NYSE: CMCM) below with my added notations:
1-year chart of Cheetah (NYSE: CMCM)
After debuting around $14, CMCM embarked on a rally that took the stock to a high of around $30. At that time, the stock created an important level of support at $26 (red). Two weeks into September the stock broke that support and has been falling lower ever since. CMCM tried to bounce at both $24 and $20 on the way down (blue), but those $2 levels couldn’t hold and the stock is now approaching the key level to watch at $18 (green).

The Tale of the Tape: CMCM is approaching its key level of $18. A long trade could be made at $18, or on a break back above $20. A short trade could be made on a break below $18 or on a rally up to $20.
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Low-Volume Melt-Up Fails To Stall Small Caps Worst Streak In Over 2 Years / by Tyler Durden on 10/03/2014 16:06
Despite a low-volume melt-up in stocks off yesterday’s European close lows, US equities closed lower on the week with small caps once again the laggards. Even as stocks closed red, the costs of protection in credit and equity markets tumbled as the last 2 days volumeless liftathon in stocks took place against the background of very modest Treasury selling – this has the stench of high-yield bond exposure being significantly reduced (and synthetic hedges being lifted) – something we saw Wednesday into the close. The USDollar rose the most in 15 months today (up for the 12th week in a row – longest streak since Bretton Woods) led by Cable and EUR weakness. Jobs data losses in bonds today were largely reversed with TSY yields ending the week down 7-9bps. Commodities were ugly with silver and oil (under $90) joined at the hip and gold closing below $1200 for first time this year. The Russell 2000 closed lower for the 5th week in a row, the worst streak since Aug 2011.
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